Imagine falling ill, getting in an accident, or receiving news that your employer no longer needs your services.
The effects of involuntary redundancy, accident, or illness on one’s income are devastating. Even greater of a challenge is that these occurrences are mostly unexpected; thus, people are often unprepared for them.
Now, imagine that happening to you with your home under a mortgage. Sounds pretty depressing, right? Well, it doesn’t have to be. With that said here is a simple guide to choosing an affordable insurance cover for your mortgage payment.
The solution to handling your mortgage payments after you become redundant or cannot work due to an accident or sickness lies in being prepared. You may wonder, ’but how?’ The answer to this is to make a cover for your mortgage payments. This article gives you insights on the ‘what and why’ of taking the cover.
First off, what is this Cover?
Mortgage payments are often paid every month. Making these payments can be quite hard in instances where you have little to no income.
This situation leaves you exposed, and you may even lose your home as a result. You will need to take mortgage payment protection insurance (MPPI) cover to protect yourself.
The insurance covers your monthly mortgage payments if you lose your job, fall ill or get into an accident.
Types of Mortgage Payment Covers
The types of insurance covers for your payments are three, depending on why you want to be covered. These are:
- Unemployment Cover. This policy is made to cover your mortgage payments in the event where you become redundant. However, it is essential to note that getting terminated under normal circumstances is not regarded as redundancy.
- Sickness and Accident Cover. As the name suggests, this offers you cover when you are involved in an accident or fall ill, and you cannot work.
- Sickness, accident, and unemployment cover. This option offers you protection against all three risks. This way, if any or all of them happens, you will still make your monthly mortgage payments.
You must analyze the covers before making your decision carefully. You may, for example, be working on a permanent employment contract of about ten years. In this case, the chances of redundancy are almost zero. As such, an unemployment-only cover may be pointless. A sickness and accident cover only will serve you better.
Benefits of an MPPI Cover
Benjamin Franklin once said that an ounce of prevention is worth a pound of cure. Life is unpredictable and filled with numerous uncertainties. It is, therefore, better to take precautions and have a plan whenever possible. Having an MPPI cover is one way to safeguard you against uncertainty.
Firstly, it is attached to the repayment of your mortgage. Let’s face it; mortgage repayments account for a large part of the monthly expenses. The payments are also required every month. If you lost your income and miss your payments, you might lose your home. This cover ensures this does not happen.
Second, this insurance provides you with short-term coverage. The policy covers you for a period of about 12-24 months. This time period is enough for you to get things together without worrying about making mortgage payments.
Third, insurance comes with peace of mind. With risk, you never really know. There are equal chances of it happening and not happening. However, having a policy leaves you to rest assured that you are safe if the worst happens. See this link to know more https://www.which.co.uk/money/mortgages-and-property/mortgages/what-is-mortgage-protection-insurance-a912h5h1z67y
How to Choose a Cover for your Mortgage Payments
Here are some simple steps to follow in your journey to getting an MPPI:
- Research and Planning.
As in everything else, performing enough research reduces the possibility of making mistakes. In the research stage, use the WWWH approach to understand all aspects of insurance. Which option do you want? What does it offer you? Why do you want it? Being able to answers these questions leaves you with a list of the exact things you want. This way, making your decision will be easy.
- Find a suitable company.
The second and most crucial step is finding your insurer. To do this, you will need thousands of service providers. You can quickly get this by doing a quick internet search. You can also look for options in local insurance directories and online listings. Apart from this, you may also use your network of friends, family, and colleagues. Some the factors to consider while choosing an insurance company include:
- The overall company values. What are the missions and visions? Do they resonate with you?
- How long has it been in business? Usually, a business that has been in existence for some time has a track record of results.
- The company’s reputation. What are people saying about it?
- The financial strength of the company. You are much safer with a company with a solid and stable financial base.
- The company’s location. Do you want to have most of your dealings with the insurer online or offline? If you prefer offline, a company near you is your best bet.
- Select the option you prefer
After identifying a suitable insurance company, the next step is selecting your cover of choice. This step is crucial as it determines everything about your policy.
For example, what gets covered and how much payout you get in case the risk does occur. A representative from the company you choose will walk you through the process. Here’s what to look into before you make your decision:
- Your specific needs. Doing this ensures you don’t take out a cover you don’t need.
- The price. Only select what you can afford. Your policy is supposed to protect you, not subject you to further financial problems.
- How fast you need your payout in case of risk. Some options are active immediately. Other options have a standard waiting period, usually 30-180 days. This period is put in place, especially for unemployment-only options, to discourage individuals who know they will be redundant from taking it.
- The payment plans. It is best to look into all the available plans against how much you have. Doing that will help to ensure you only take on what you can handle.
- Fill in the paperwork.
Filling in the paperwork is the final step towards getting your mortgage payments insurance. Here, you will fill in your personal and even financial information.
The procedures for this step vary from one company to another. Some companies allow you to do this step online, while others require your physical presence.
After this, depending on the company’s service and application model, your registration process is complete.
Factors affecting the cost of your MPPI
The cost of MPPI varies from client to client and from company to company. Some factors come into play to determine how much you pay.
Your salary is one such factor. You will generally pay a higher cost if your salary is higher. Another crucial factor is the size of your repayments. When your monthly mortgage payments are high, you will pay higher costs. The type of policy also affects its costs.
Despite being covering you in times of unemployment, accident, or illness, there are certain circumstances your policy may not cover. Knowing these exclusions is critical. It helps you understand your limits, inclusions and manage your expectations.
For example, an accident and illness MPPI does not cover pre-existing conditions. Therefore, if you are off work due to an illness you had before taking the cover, you will not be paid. It would be best if you considered a different type of income protection.
Mental health issues are also another grey area. It may be difficult to associate your income loss with a mental illness directly.
You should always adhere to all parts of the agreement between you and the insurer. Failure to do that can lead to you not getting payments when the risk happens. You must read through all documents and understand everything before taking insurance.
In addition, do not decide in a rush. Take your time to learn as much as possible. Some agents may also hide certain information in order to have you give in quickly. In such a scenario, ask questions and do not give in to any pressure. If the deal is too good, you probably should look for another company.
When taking the policy, remember value lies not in taking the policy but in what you receive in case of risk. Carefully study this aspect, and only take a cover if it is worth it. Click here to read on how you can lower your mortgage payments.
Life often takes unexpected times. You might be stable one day and homeless the next. To cushion you against these uncertainties, having a mortgage payment cover is a necessity, not a want. And preparation breeds confidence after all. Remember to research widely and compare companies before making your decision. It would help if you also sought out the help of a professional consultant. The information you get from them will be unbiased, leading you to your best decision.